Economic deterrence, institutional factors and theory of planned behaviour associated with sales tax compliance among SMEs in Mogadishu, Somalia

Somalia’s recent debt relief and anticipated decline in external grants have increased the importance of domestic revenue mobilization. However, sales tax compliance among small and medium-sized enterprises (SMEs) remains constrained by widespread informality and limited institutional capacity. This study examines economic, institutional, and behavioural factors associated with sales tax compliance among SMEs in Mogadishu. A quantitative cross-sectional survey of 294 SMEs was analysed using Linear Probability, Probit, and Logit regression models. The results show that tax audits are positively associated with compliance (Logit coefficient = 1.087, p < 0.10), increasing the probability of compliance by 3.8 percentage points. Subjective norms are also positively associated with compliance (coefficient = 1.126, p < 0.05), with a marginal effect of approximately 4.5 percentage points. Conversely, procedural complexity is negatively associated with compliance (coefficient = −0.283, p < 0.10). Findings are consistent across the three models. By integrating Economic Deterrence Theory, Institutional Theory, and the Theory of Planned Behaviour, the study provides empirical evidence on SME tax compliance in Somalia and supports risk-based audits, simplified tax procedures, taxpayer education, and greater administrative transparency.